Over the last month, shares in Vodafone (LSE: VOD) (NASDAQ: VOD.US) have enjoyed something of a purple patch and have easily beaten the performance of the FTSE 100. Indeed, the telecoms major has seen its share price rise by a whopping 15% in the last month, while the FTSE 100 is up a not inconsiderable 4% over the same time period.
The question is, can Vodafone continue this outperformance in 2015 and beat the FTSE 100 next year?
European Optimism
While the Eurozone economy is still posting extremely sluggish growth numbers and remains on the brink of deflation, optimism regarding its future prospects has come to the fore in recent weeks. A major reason for that is not improved numbers, since Germany, for example, remains perilously close to entering a recession, but rather action that is set to be taken by the ECB.
Following the lead of central bankers in the US and UK, the ECB is beginning a process of implementing its own asset repurchase programme that could help to stave off deflation and, crucially, improve the economic outlook for the region and the companies that operate within it.
This is important news for Vodafone since, following the sale of its stake in Verizon Wireless earlier this year, it is now focused on Europe. And, with Vodafone’s recent results showing a stabilisation in its revenue in the region, further improvements to the prospects for Europe could lead to not only better sentiment in the company’s shares, but also increases to its top and bottom lines.
Looking Ahead
While Vodafone’s Project Green involves spending up to €19 billion on upgrading its offering across Europe so that 3G and 4G is available to more customers, it seems to be bearing fruit. In the company’s recent results, it reported that the faster service is meaning customers are demanding more data, which is clearly good news for the company. Certainly, there is a long way to go, but Vodafone’s strategy of focusing on Europe may be beginning to show the first green shoots of recovery in the company’s top line.
Of course, for many investors, Vodafone remains a highly desirable income play. It increased its interim dividend by 2% and now yields a highly enticing 5%, which is significantly more appealing than the FTSE 100’s 3.4%. Furthermore, with Vodafone’s share price having been pegged back prior to the last month by doubts surrounding the Eurozone and the company’s strategy within it, any further stabilisation in the region could lead to a higher share price for Vodafone.
With the full effects of the ECB’s QE programme yet to be felt, Vodafone could be on the cusp of a period of strong share price performance. As a result, it could continue its recent share price strength and beat the FTSE 100 in 2015.